Match List-I with List-II

List-I	List-II
(A) Liquidity Ratio	(I) Interest Coverage Ratio
(B) Profitability Ratio	(II) Acid-Test Ratio
(C) Solvency Ratio	(III) Fixed Assets Turnover Ratio
(D) Activity ratios	(IV) Return on Capital Employed Ratio

Choose the correct answer from the options given below:

Looking at each category and identifying which specific ratio belongs to it:

Liquidity Ratios measure short-term financial health and ability to meet current obligations. Acid-Test Ratio (Quick Ratio) = $\frac{\text{Current Assets - Inventory}}{\text{Current Liabilities}}$ is a liquidity ratio as it shows the ability to pay off current liabilities with quick assets.

Profitability Ratios measure the earning capacity of the business. Return on Capital Employed (ROCE) = $\frac{\text{Net Profit before Interest and Tax}}{\text{Capital Employed}} \times 100$ indicates how efficiently capital is being used to generate profits, making it a profitability ratio.

Solvency Ratios measure long-term financial stability and debt servicing capacity. Interest Coverage Ratio = $\frac{\text{EBIT}}{\text{Interest Expense}}$ shows how many times a company can pay its interest obligations from operating profit, thus measuring long-term solvency.

Activity Ratios (or Turnover Ratios) measure the efficiency of asset utilization. Fixed Assets Turnover Ratio = $\frac{\text{Net Sales}}{\text{Net Fixed Assets}}$ measures how efficiently fixed assets are being used to generate sales, making it an activity ratio.

Correct Matching:

• (A) Liquidity Ratio → (II) Acid-Test Ratio
• (B) Profitability Ratio → (IV) Return on Capital Employed Ratio
• (C) Solvency Ratio → (I) Interest Coverage Ratio
• (D) Activity Ratios → (III) Fixed Assets Turnover Ratio

Option 2 is correct.